Business Line of Credit

Lines of credit are arrangements between lenders and borrowers that give a maximum loan balance for the borrower to pull funds from. With a line of credit, you can borrow funds at any time as long as you don’t exceed the maximum credit line amount. For a small business owner, the largest advantage of a line of credit is flexibility. You don’t have to use the total amount you’re approved for, which means you don’t have to pay that total amount back.

Lines of credit come as secured, unsecured, revolving, non-revolving, and demand lines of credit. With a revolving credit line, you’re able to continuously borrow money until you’ve reached your credit limit. Like a credit card, whenever you make a purchase, that amount is taken from your total credit limit, and whenever you make a payment, your credit limit goes back up.

FAQ

Lines of credit are mainly to help even out your cash flow. Most line of credit loans are also revolving. Revolving credit is faster and more flexible than a bank installment loan.

Revolving credit is a flexible method of borrowing money for your business. Instead of borrowing a fixed amount of money all at once, revolving credit allows your business to borrow working capital in increments that you need, up to a pre-approved limit. You make payments on a regular, predetermined schedule, and you can borrow or use more as your principal is paid down.

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Example of how to use a business line of credit

You can use revolving credit for various reasons. For example, if your store was unexpectedly damaged, you can apply for a business line of credit to get some quick funding to fix it. Or let’s say you need funding to make payroll for the next week. A revolving line of credit puts that capital in your bank account as soon as you borrow it. Revolving credit is also a great option for seasonal businesses that see a lull in cash flow.

Let’s say you need $5,000 to fix your store, and you’re approved for an amount of $20,000. With a traditional term loan, you would take out the total approval amount and begin paying it back. However, with a revolving line of credit, you only pay back what you borrow. If you take out the $5,000, you’d be paying back only that amount. As a business credit card, the $20,000 is simply the total amount you can take out at one time. Let’s also say you need $75,000 for payroll and are approved for $100,000. Again, no need to pay back $100,000 plus interest, unless you take out that total amount. The more you borrow, the more you payback. Once you make your payments, your credit limit goes back up.

Special Considerations

You decide when to use your funds and how much to take. As long as you have available funds, you can withdraw every time you need capital. With Pro Financial Consulting Loans with monthly payments with no origination fees or prepayment penalties. You can review your payment schedule before taking a loan so there won’t be any surprises.